Bank Negara Lifts 2026 Growth View To Around 5%, A Point Above The Finance Ministry

The Monetary Policy Committee held the rate at 2.75%. Kenanga goes further still, at 5.3%. The Ministry of Finance is forecasting 4.0 to 4.5 percent.

Bank Negara Malaysia now expects the economy to grow by around 5.0 percent in 2026, an upgrade from its previous guidance that growth would sit firmly within a 4.0 to 5.0 percent range.

The Monetary Policy Committee left the Overnight Policy Rate at 2.75 percent at its September meeting, saying the stance remained consistent with continued price stability and sustainable growth, and retaining its data-dependent approach. It said it would stay vigilant and assess the balance of risks around inflation and growth.

Kenanga Research, which had expected the hold, noted that the central bank's new figure sits above the Ministry of Finance's forecast of between 4.0 and 4.5 percent.

The gap between two official numbers

That is a wide divergence between two arms of the same government, and it is the most consequential thing in the announcement.

The Ministry of Finance's forecast is not a private view. It underpins revenue assumptions, and Malaysia's budget is built on them. A central bank now guiding to a full percentage point above the finance ministry's upper bound is either an early signal that those assumptions will be revised, or a disagreement that will have to be reconciled when the next budget is framed.

Anwar Ibrahim holds both the prime ministership and the finance portfolio, which makes the divergence a question about his own ministry's forecasting rather than an inter-departmental dispute.

Neither institution has publicly addressed the gap.

Kenanga goes further

The research house's own forecast is more bullish still, at 5.3 percent for 2026 against 5.2 percent in 2025. It attributes that to stronger-than-expected performance in the first half, supported by net exports and resilient domestic demand.

On that basis Kenanga expects the central bank to hold the rate for the remainder of the year, arguing that with growth assessed at around 5.0 percent and inflation well below tightening levels, there is limited urgency for further adjustment.

The inflation picture, and one oddity in it

Headline inflation averaged 1.8 percent over the first seven months of 2026. Core inflation averaged 2.0 percent. July headline was 1.8 percent.

⚠️ Core running above headline is unusual and worth noting. It means underlying price pressure is somewhat firmer than the top-line figure suggests, with volatile or administered components pulling the headline down. That sits awkwardly beside the central bank's own second-quarter reporting, which recorded fuel inflation rising to 5 percent after RON97 and diesel increases, against minus 1.5 percent in the first quarter.

Neither the central bank nor Kenanga has explained the composition, and the copy does not speculate on it.

Bank Negara's own assessment is that pass-through from higher costs to consumer prices has been limited, supported by domestic policy measures, stable demand conditions and limited spillover from export-led growth into wages.

What is meant to sustain it

For 2027, the central bank expects growth to remain resilient on electrical and electronics exports, continued strength in technology-related non-E&E shipments, sustained tourism spending, stable labour market conditions and continued investment.

Globally it took a more constructive view, pointing to strong expansion in the technology sector, improving supply conditions and stable labour markets, with sustained technology-related spending expected to cushion some of the effect of geopolitical uncertainty.

The risks, as listed

The committee described the balance of risks as broadly even.

On the downside: prolonged geopolitical tensions, tighter global financial conditions and elevated financial market valuations. Domestically, an extended Middle East conflict and weaker commodity production. The central bank continues to see upside risks to domestic costs from the Middle East conflict if elevated global commodity prices persist.

On the upside: stronger technology-related export demand, better-than-expected global growth, higher tourism activity, faster recovery in global supply chains and pro-growth policies in major economies.

⚠️ One domestic risk does not appear on that list. An emergency was declared in Serian, Sarawak, this week after the Air Pollutant Index passed 500, with schools across the state already closed and officials indicating that non-essential work and outdoor activity can be halted above that threshold. Whether a haze episode of this severity registers in national accounts is an open question — but "weaker commodity production" is on the central bank's own list, and the fires driving the haze are burning in plantation and peatland areas of the region.

What to watch

Whether the Ministry of Finance revises its forecast. The gap is a full point at the upper bound. A revision would confirm the central bank called it first; no revision, with the budget built on 4.0 to 4.5 percent, would leave two official numbers in circulation.

Whether core inflation continues to run above headline. If it does, the composition question becomes a policy question, because core is what a central bank watches when deciding whether to move.

Whether the haze episode leaves a mark in third-quarter data. Sarawak is a substantial part of the national economy and an emergency-level air quality event with work stoppages is not a routine seasonal cost. The Q3 figures, due in November, are where it would show.